Life Insurance: A Multifaceted Savings Product
Life insurance is often compared to a Swiss Army knife because of its versatility and numerous benefits. It allows you to grow your savings and optimize the transfer of assets with favorable tax treatment. Although these advantages are well known to savers, life insurance has other benefits that are less widely recognized.
1. Scheduled Payments: A Flexible and Customizable Option Recent life insurance policies generally include the option to make scheduled payments. This option allows you to set up regular, automatic payments into your policy, and you can determine the amount and frequency of these payments. You can adjust, suspend, or stop these payments at any time. This solution offers great flexibility and allows you to build up capital over time with minimal effort.
2. Arbitrage: Safeguarding Your Earnings with Ease Investing a portion of your savings in unit-linked funds can be more profitable, but also riskier than euro-denominated funds. To protect your gains, you can perform arbitrage by transferring a portion of your savings from unit-linked funds to euro-denominated funds. This transaction is often free and tax-neutral. In addition, some contracts offer an automatic arbitrage option to “lock in capital gains.”
3. Gradual Investing: Spreading Risk and Smoothing Out the Purchase Price When you have a large sum to invest, gradual investing can be an attractive option. You deposit the entire amount into a euro-denominated fund and let your insurer manage the portfolio to gradually transfer all or part of the capital into unit-linked investments. This method helps spread out the risk and smooth out the purchase price of your shares.
4. Multi-portfolio management: a customized approach “Two-portfolio” or “multi-portfolio” management is offered in wealth management contracts and online policies. It allows you to delegate part of the management of your savings to a professional, while managing another part of your policy yourself. With a multi-portfolio life insurance policy, you can combine discretionary management with all other investment vehicles listed in the policy to create a personalized life insurance plan.
5. The Minimum Guarantee: Protect Your Principal and Provide for Your Loved Ones The minimum guarantee is intended for holders of multi-asset life insurance policies with unit-linked features. The policy beneficiaries named in the beneficiary clause receive at least the principal amount invested upon the policyholder’s death, with any capital losses borne by the insurer. This option is a good choice if a significant portion of your assets is invested in risky products, such as equity funds. However, before purchasing a policy, be sure to carefully review the premium schedule and terms, as this coverage has a cap and the premium increases with the insured’s age.
